Food does not give a truce to inflation: sugar, butter and oil lead the rises in March

Food prices have already risen for a year and tensions persist, despite the fact that the general CPI was contained at 3.3% in March. Half of the nearly 60 types of food included in the INE statistics have risen in price in the last year above the average for this category, which stood at 16.5%. Sugar, with a year-on-year increase of 50.4%, butter (37.7%), olive oil (32.1%) and milk (30%) lead the increases. The impact of the increases in fresh vegetables and legumes (27.8%), which have accelerated since January, also stands out. This escalation contrasts with the annual drop of 50% in electricity, 15.3% in diesel and 12.6% in gasoline last month.

Food began to rise, more slowly, in the spring of 2021, and the trend accelerated especially from October 2022. The unprecedented increase in costs, especially energy and raw materials due to the outbreak of the war in Ukraine, and the bad harvests, which have resulted in a reduction in supply, are the main elements that explain the upward drift, which affects the whole of the EU. Everything points to the fact that the ceiling may have been reached —although the CPI for food continues at 16.5%, compared to 3.3% in general, it is one tenth less than in February— but it has not moved to the grocery basket. the purchase.

Why do they keep going up? The food chain is complex and each product has a specific context. In the case of sugar, a key component for the industry, the price spiked in October and has remained high ever since. It is a global phenomenon. The FAO Sugar Price Index has been rising for two months, after easing at the end of 2022, but remains at the highest level since October 2016. “The increase is mainly due to concerns about availability for the 2022 season /2023, after falling production forecasts in India, Thailand and China”, explains the agency dependent on the UN. The overall FAO index has been down for a year, although it does not include fruits and vegetables, and prices remain at historically high levels.

Butter is also much more expensive than a year ago. The price rose 37.7% year-on-year in March, according to the INE, although it has been moderating since December (in the last month of last year it closed with an annual rise of 42%). The increase is mainly due to a drop in milk production: many farmers have chosen to slaughter dairy cows, because their meat is more profitable. To produce a kilo of butter, at least 25 liters of milk are required, and the decrease in milk production has affected the supply of the product. Milk has also risen (30%), although at a slower rate than the two previous months (33.4% in January and 33.2% in February).

In the case of oil, the causes are similar. The historic drop in production caused by the drought has pushed prices up and the forecasts for the following season are not very encouraging. In March, the annual rise was 32%, the third highest of the entire CPI, although less than the 33.5% in February. Both oil and milk have benefited from the VAT reduction that came into force in January to combat inflation. In the case of oil, it has gone from 10% to 5%; and has been removed in the case of milk. Despite this, they continue to rise, although by applying a lower or no VAT, that in principle helps to moderate the rises.

fewer greenhouses

Oil, butter, sugar and milk lead the price increases but do so less than last year, according to the INE. The same goes for fish, shellfish, cheese and eggs. However, “it should be noted, although in the opposite direction, the rise in the prices of legumes and other food products, higher than in the same month of 2022,” he warns. These products have been the ones that have weighed the most in the CPI for food. In the case of fresh vegetables, the annual price increase was 27.8%, while in January it stood at 11.5% in annual terms. The lower production is also one of the main causes of these increases: greenhouses in central Europe and the United Kingdom have been stopped these months (they work with gas and are not profitable) and demand has concentrated in the south of the EU , especially Huelva and Almería, an area known as the orchard of europe. With the arrival of spring, this situation should normalize.

Will the increases continue? Everything indicates that, between April and June, they should remit, although the Ministry of Agriculture has warned that the process will be slow. The moderation of costs is beginning to be detected in the food chain (from producers to supermarkets), as indicated by Mercadona this week, which has announced price reductions on 500 products until the end of the year due to the new trend. Other chains have announced measures to make the shopping cart cheaper. Eroski recently announced the launch of a shopping basket with 600 basic products for less than 2 euros. Meanwhile, the Dia group announced last Tuesday a 15% increase in its investment in promotions, up to 150 million euros, “to support family savings.”

Regarding the VAT reduction, the consumer organization Facua has published a report this Friday in which it highlights that four out of ten of the foods affected by the measure have raised their prices in supermarkets since January. Meanwhile, the OCU calculates that the escalation of food prices in the last year supposes an average annual extra cost in the shopping basket of 924 euros.

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